Stacy Lee, a middle-aged African-American pastor, is standing in the entryway of the Covenant Christian Center in Peoria. He's wearing a four-button suit with a tie and describing his church's deal with Mortgages Ltd.

"We just wanted to find out what would happen if we got to the end of the loan and needed more time," Lee says of his first meeting with Scott Coles, Mortgages Ltd.'s CEO at the time.

"Scott said, 'I will not increase the principal or interest. I'll rewrite it or extend it. Don't worry. I've got you taken care of. I won't increase the interest rate,'" he recalls.

Pastor Stacy Lee at his church, Covenant Christian Center, in Peoria.

For years, Mortgages Ltd. investors received monthly checks with pay stubs like this one. (Click here for more details.) The interest payments halted in June, and now investors just hope to recoup their capital.

The year was 2005, and Lee's deal was not a big one by commercial real estate standards. Still, he wanted Coles' word that the loan could be extended at its fixed payments — should the church fail to secure a long-term lender. Coles gave him that promise, he says.

So after a handshake and a look in the eye, Lee signed a one-year loan for $1 million. He and his congregation used the money to convert an abandoned Luby's Restaurant into the Covenant Christian Center.

For 12 months, the members of the church paid $10,402.66 on time, every month. They poured their sweat equity into the property, too, working evenings and weekends to tear out drywall, retile floors, and fix the outside of the building.

In March 2006, the church was set to transfer the loan to a 15-year mortgage with a conventional lender. Then, at the last minute, the lender pulled out.

Lee immediately called Coles to make sure the loan could be extended at the same rate — as the two had agreed in person. Coles didn't return Lee's messages, Lee says, so the church sent another check for $10,402.66 on its usual payment date.

The check was returned, and Mortgages Ltd. immediately filed a notice to foreclose on the property (worth about $2 million at the time). Records show the church's interest rate then jumped from 10 percent to 67.75 percent APR.

Mortgages Ltd. eventually claimed the church owed more than $2.5 million on its $1 million loan. If Mortgages Ltd. had finished the foreclosure, it could have sold the building for about $2 million, paid investors, and then kept the remainder of about $1 million as profit.

That's exactly what was going to happen. Until attorney Donald Gaffney intervened. Gaffney is a partner at the high-end firm Snell & Wilmer. His billing rates are beyond the price range of most Phoenix residents, Pastor Lee included. When Gaffney heard about the 67 percent interest rate and hidden fees, he offered to represent Lee's church for free.

In the process, Gaffney uncovered a pattern in Mortgages Ltd.'s records. The lender's aggressiveness with Pastor Lee reflected a broader strategy of saying one thing and doing another — with investors and borrowers alike, Gaffney says.

Coles had apparently rigged a system in which he made more money on a foreclosure than on a paid-off loan, by selling defaulted loans to a second group of investors — who then paid off the first investors.

Gaffney learned that Mortgages Ltd. investors had no idea how much extra money Coles was pocketing on defaulted loans — or that Mortgages Ltd. was subjecting investors to higher risks so the company could make extra fees and interest on defaulted loans.

Mortgages Ltd. spent more than $500,000 wrangling with Gaffney about the $1 million loan. They eventually settled the case.

"He promised us one thing and stabbed us in the back, knowing he could get the property, even though we never missed a payment," Lee says of Coles. "Without the help of Don Gaffney we would have lost everything."

Gaffney has experience with fraud in Arizona. He earned his stripes by working as a lead attorney against Charles Keating during the savings and loan crisis of the late 1980s. As Gaffney pried into Mortgages Ltd., he smelled the same sour deceit that he'd unearthed in Keating's business.

So much so that on November 21, 2006, Gaffney wrote a six-page letter to state regulators, warning them about Mortgages Ltd.'s practices. He addressed the letter to Susan Segal, chief counsel at the Arizona Attorney General's Office and mailed a second copy to the Arizona Department of Financial Institutions.

"Mortgages Ltd. appears to be engaged in a serious breach of proper mortgage brokerage practices . . . Based upon inquiries with other attorneys in Phoenix, this scheme may be a pattern of illegal loan activity conducted by Mortgages Ltd." Gaffney wrote.

"We earnestly request the assistance of the State of Arizona in investigating [this company] and their practices," he concluded. He attached 54 pages of financial records and documentation to the letter.

What happened next is exactly nothing.

For another year and a half, Mortgages Ltd. continued to do business, attracting more investor dollars and loaning those dollars to increasingly larger and riskier projects.

The fierceness with which Mortgages Ltd. squeezed its borrowers was matched only by the fervor with which it pursued investors. The company bragged that it was SEC-licensed and was a licensed commercial mortgage broker in Arizona. Both claims were true, but neither had anything to do with the safety of its investments.

The people above are just more of Scott's type of phony thousandaires who live in Scottsdale. "Charity?" Sure, it's real easy when you are giving away other people's money and taking credit for it.I had the unfortunate chance to meet and deal with Scott 11 years ago on a $1M loan deal where he was asking me for money to invest with him to buy one of his "bad" loans. Scott personally explained to me his scheme of essentially "loan-sharking" the borrowers by jacking up expenses and legal fees the moment a loan came up or late and that we were all but guaranteed 15-20% returns on our money. I ran the other way.

Karma is a bitch; he was a scumbag and, like Obama and his cronies, you lie down with dogs you wake up with fleas. Anyone who claims that they knew the man and uses words like "honest" and "upstanding" to describe him is the same scum that he was.

The people above are just more of Scott's type of phony thousandaires who live in Scottsdale. "Charity?" Sure, it's real easy when you are giving away other people's money and taking credit for it.I had the unfortunate chance to meet and deal with Scott 11 years ago on a $1M loan deal where he was asking me for money to invest with him to buy one of his "bad" loans. Scott personally explained to me his scheme of essentially "loan-sharking" the borrowers by jacking up expenses and legal fees the moment a loan came up or late and that we were all but guaranteed 15-20% returns on our money. I ran the other way.

Karma is a bitch; he was a scumbag and, like Obama and his cronies, you lie down with dogs you wake up with fleas. Anyone who claims that they knew the man and uses words like "honest" and "upstanding" to describe him is the same scum that he was.

Scott would never have pulled out of the deal for no reason. Anyone who knows him knows that about him. He was an honest businessman. He was a good, beautiful person, who gave a lot to the community, and you were right in saying he committed suicide because he cared so much about his investors he could not live with himself to fail them in this way. We all took a risk investing in the way we did, and losing it all is a part of that risk. Scott did what he could to try to keep things afloat, but no one could accomplish that in this market - look at all the other companies, much larger, that are failing and need to be bailed out by the Fed.

As for Ashley Coles, she was just riding on the coat-tail of a good man. There is nothing noble or good about her. She is a gold-digger who cared only about herself. The only reason she joined Childhelp and Boys and Girls Club was because she found out Scott's ex was involved in these and she wanted to outdo her. But her commitment to these faded away soon after her marriage. The gloves came right off as soon as she felt she had Scott nailed. Now that he has passed and left what he had to his children (and despite that he did leave her with a lot), she is fighting to take all the money away from Scott's children. That is not a good person. All who know her should condemn her because she has the audacity to do such a horrible thing, not to mention that she was a main cause of his death.

I am really disappointed in regards to the article written by John Dickerson on September 18, 2008 about Scott Coles.I knew Scott and I know his wife Ashley and I consider them to be two of the most considerate, respectful and kind people I have ever met. They are kind to anyone and everyone they meet and they have been extremely generous in their contributions back to our Valley's charities.How often do you, John, spend large portions of your income with local or national charities? And, if income is not an option do you donate your time? Mortgages Ltd gave out high risk loans to clients that could not get loans through typical banking establishments. Therefore Mortgages Ltd.charged higher interest rates for those borrowers because they were considered high risk and not necessarily reliable. This is the exact reason we all have credit reports. Increased interest rates for high risk borrowers are incredibly common when people buy cars, buy houses (now) or sign up for credit cards...etc.I would like to know why the conventional lender pulled out of Pastor Stacy Lee's loan agreement at the last minute. I'm sorry but don't play naive, something was wrong and that quite possibly had something to do with why Scott raised his interest rate. Plus, you have to remember Scott is no longer with us to tell us his side of the story. I have seen many prestigious companies file for bankruptcy in the last 6-7 months- Scott is not an anomaly. We passed a $700 billion dollar bail out plan just so that we don�t loose our banks- which would include our personal savings, retirement�etc.John Dickerson, Seth Goldberg, Susan White and the person that refused to give their name though I�m not sure why since she obviously wanted to express her hatred for Scott but then required that her identity be kept "Anonymous." (She needs to grow a spine- that's pathetic).I would like to know if the clients that said such hurtful things about Scott in your articles were invested with him during the economic boom in Arizona. If they were, I guarantee that they were not complaining then! In addition do they give back time or money to the community like Scott and Ashley did?John, your July 31st article was much less biased though it still included some ridiculous comments like Mike Denning's comment about Scott stating that "He kind of turned into a wanna-be rock star there for a while" which caused me to laugh out loud because it was so far from the truth. Mike was the former president of Mortgages Ltd (do you think he may be a bit angry with his current financial situation now that the company is Bankrupt?!)I am not sure what has happened since your first article on July 31, 2008 because your most recent article in my opinion was obviously meant to damage his reputation even worse. I sensed a bit of anger in that article- was that because you believed every awful thing you were told about Scott by bitter ex-employees or investors, or is it simply because if the article "bleeds it leads?"Scott took his own life which I honestly believe he did because he could not face all of his friends and business partners that had invested a good portion of their life savings with him. Scott has a wife and three children who no longer have a husband/father, and not one person in your articles even mentioned how devastating that is because, in my opinion, they are too self absorbed to have an ounce of remorse for his family and their loss. I personally believe that Scott Coles was a legitimate business owner and like many of us he did not see the economy taking such a fast and drastic down turn and he quickly found himself in a position he simply could not envision himself recovering from. He did live a lavish lifestyle; however you reported that he was constantly having parties at his estate but what you failed to mention is that any parties that we not small, involving close friends, were in his guest house and guests had to pay admission. If I remember correctly the Super Bowl party at his estate last year was around $1,000 a ticket.Lastly I would like to condemn anyone who gave their life savings to Mortgages Limited and is crying about it now- everyone knows that you never put all of your eggs in one basket. Always diversify! Buy a home you can afford (roughly 3 times your annual income) and diversify your savings. And when it all goes to Hell�blame yourself for overextending.

Another story about Coles but Hirsch keeps Coles Ideas alive by wanting to allow a 75 million $ dip loan on centerpoint. Putting 1/2 the 200 million radical bunny money at risk by putting ML in 2nd position on the deed. Centerpoint will be worth half of what they think. The state needs to put RB into receivership and get someone that doesn't keep Coles ideas going.

I take great pride in stating that Pastor Stacy is a GREAT man and never once stole any of the churche's money! Obviously the person who commented in #2 has no clue!! 1st of all Pastor Stacy does not beg for money because he knows that God will provide for the church and the people in it! The people in the church who gave money, gave because they either felt led to, wanted too, or because that is what the bible tells us to do. The family at CCCI is close knit and even though people come and go through the years - we are faithful and know that what God started in the building we now have church in, will be completed and we will grow and expand beyond any of our imaginations.

Before you comment on a Pastor you dont know, please make sure you have all the facts straight. We give because WE WANT too! Pastor Stacy and his wife are incredible people with a great blessing on their lives, and I plan to be around and ministering with them for as long as I possibly can!

sCOTT TOOK THE EASY WAY OUT AND TOOK HUNDERED OF REGULAR WORKING CLASS PEOPLE WITH HIM. HIS ACTIONS CAUSED MY CO TO close down. I am out of a job with two kids and a mortage to pay much like everyone else I worked with. I cant tell you how much I hat this man I and the rest of the people who were hert by this will move on and rebuild our lives with our wonderful families. That is the good news the other good news is when we all look back and realize we have pulled up our boot straps and fixed out lives he will still be dead and the world is a better place because of it.

Ask Pastor Stacy Lee about the thousands of dollars church parishioners gave to pay for the completion of the church but yet the church is not complete? Where did the money go�.? Not only was Scott Coles a theft Pastor Stacy Lee is the worse theft of them all stealing from his own church. Yes he will give you a good song and dance and led in into another direction but will not give you a straight answer. There are many people from his own church he has defrauded just like Scott Coles. He did lose parishioners because of the court case he lost parishioners because he did not pay back the thousands of dollars people �loaned� to him not gave. He does not like to give people their money back he has a good track record for this just look at the many law suites against him for not paying back.

Total crook and the New Times should win an award for their reporting..Fraud is fraud he was a dishonest scumbag who took advantage of many people. I now many people who would not do business with him and are hardly surprised..hopefully the Radical Bunny folks go to jail and the investors get something out of this.

One week after the company assured investors that all was well, Mortgages Ltd. vice president Phillip Sollomi, Jr. wrote a letter on November 15, 2007, to a wealthy borrower, pleading to borrow $2 million so the company could fund another borrower's loan.

One week after the company assured investors that all was well, Mortgages Ltd. vice president Phillip Sollomi, Jr. wrote a letter on November 15, 2007, to a wealthy borrower, pleading to borrow $2 million so the company could fund another borrower's loan.